Question

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Exercise 11-6 Stock dividends and per share book values LO P2

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The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:

Common stock—$20 par value, 150,000 shares authorized, 56,000 shares issued and outstanding	$	1,120,000
Paid-in capital in excess of par value, common stock		525,000
Retained earnings		675,000
Total stockholders’ equity	$	2,320,000

On February 5, the directors declare a 12% stock dividend distributable on February 28 to the February 15 stockholders of record. The stock’s market value is $39 per share on February 5 before the stock dividend. The stock’s market value is $35 per share on February 28.

Exercise 11-6 Part 1

1. Prepare entries to record both the dividend declaration and its distribution.

Journal entry worksheet

Record the declaration of 12% stock dividend.

Note: Enter debits before credits.

	Date General Journal Debit Credit Feb 05 Retained earnings 262,080 Common dividend payable Paid-in capital in excess of par value, Common stock

Record the distribution of 12% stock dividend.

Note: Enter debits before credits.

	Date General Journal Debit Credit Feb 28

Answer 1

• Calculation of no. of stock issued as Stock Dividend and amount of Stock Dividend
• No. of common Stock shares outstanding = 56,000

Stock Dividend = 12%

No. of stock to be issued as Stock dividend = 56000 x 12% = 6,720 shares

Market price on Feb 5 = $ 39 per share

Amount of Stock Dividend = 6,720 shares x $ 39 = $ 262,080

• Entry 1

Date	General Journal	Debit	Credit	Working
Feb-05	Retained earnings	$      262,080.00		[See above]
	Common dividend payable		$    134,400.00	[6,720 shares x $ 20 par]
	Paid-in capital in excess of par value, Common stock		$      127,680.00	[6,720 shares x $ (39 - 20)]
	(Stock Dividend declared)

• Entry 2

Date	General Journal	Debit	Credit
Feb-28	Common dividend payable	$       134,400.00
	Common Stock		$      134,400.00
	(Stock Dividend distributed)